Tesla (NASDAQ:TSLA) shares have experienced an unprecedented crash in recent months. Stocks have lost a massive $700 billion in market value.
So let’s see what this means for a hypothetical four-year investment and explore where the stock will go next.
Why I take long positions
Tesla may have fallen 50% in the last six months, but it’s up 425% in four years. This is a perfect example of why investing should always be for the long term. Because if I research well and choose wisely, quality companies are more likely to perform well in the long run.
So if you invested £1,000 in Tesla four years ago, you would have £5,500 today. This is due to the rise in stock prices and the depreciation of the pound. Obviously, I’d be a very happy investor, but I have no doubt he’ll berate himself for not cashing out 18 months ago when the stock peaked.
What’s Behind the Recent Collapse?
To predict where Tesla’s stock will go next, it’s important to understand why it plummeted in the fall.
For a while at least, Tesla seemed to defy the market, staying strong as growth stocks crashed. Comments from Elon Musk himself and from investors like Kathy Wood probably played a part too.
But eventually the bubble burst. Analysts tend to attribute this to a lack of targets, concerns about EV’s post-discount profit margins, and Musk’s sale of Tesla shares to finance his Twitter acquisition. This is in addition to concerns over the deteriorating economic environment.
Tesla was the first company to expand the use of clean technology to produce desirable cars. We are ahead of the EV revolution. The company has cash in the bank (as of September he had $21 billion) and in the third quarter of 2022 he generated free cash flow of $3.3 billion.
However, many investors question the company’s valuation. And for me, those concerns remain even after the stock market crash. The trailing 12-month price/earnings ratio (P/E) is 33.5. Its price-to-sales ratio (5.5) is also somewhat ahead of Chinese EV makers and traditional automakers.
PorscheFor example, it trades at a P/E of just 3.1.
A high P/E ratio suggests that investors view it as a growth stock. But I have to ask because there’s a big gap between Tesla’s valuation and its peers. Could Tesla offer much more growth than other auto stocks?
It’s an incredibly difficult question to answer, but recent performance hasn’t been very encouraging. The company fell short of his Q4 2022 forecast, with him delivering 405,000 compared to an estimated 430,000. This is his third consecutive quarter in which the company’s production numbers have disappointed.
So, would you buy Tesla stock? Yes, it’s more attractive than it was a year ago, but it’s too expensive for me. I think there are several EV companies in China. Nio When lee auto — it looks a more promising investment.
Post If you had £1,000 invested in Tesla stock four years ago, here’s how much it cost when it first appeared on The Motley Fool UK.
James Fox has positions at Li Auto and Nio. The Motley Fool UK recommends Tesla. The views expressed about the companies mentioned in this article are those of the author and may differ from official recommendations on subscription services such as Share Advisor, Hidden Winners and Pro. At The Motley Fool, we believe that considering diverse insights makes us better investors.
Motley Fool UK 2023